Australia’s financial watchdog, the Australian Securities and Investments Commission (ASIC), has issued a stern warning to young investors, urging them to be cautious when relying on social media influencers and artificial intelligence (AI) chatbots for financial advice. The warning comes as a new survey reveals that a staggering 23% of Gen Z Australians now own cryptocurrency, with many basing their investment decisions on social media and influencer content.
Trust in Unreliable Sources
The survey, conducted between November 28 and December 10, 2022, with 1,127 respondents aged 18 to 28, found that 63% of Gen Z uses social media for financial information and guidance. Notably, 18% turn to AI platforms, and 30% rely on YouTube for financial insights. Despite this, 56% of Gen Z respondents say they trust financial information found on social media, while 52% place their trust in ‘finfluencers’—social media personalities who specialize in financial advice.
ASIC’s Concerns
ASIC Commissioner Alan Kirkland spoke to the Australian Financial Review about the risks associated with this trend. ‘We’re conscious that there’s a lot of marketing activity on social media to encourage crypto investment, and our work has shown some of it is actually encouraging people to invest in scams,’ he said. Kirkland highlighted the volatility and complexity of the crypto market, emphasizing that young investors may be misled by unrealistic expectations set by influencers.
AI and Financial Advice
The survey also revealed that AI platforms are among the most trusted sources of financial information for Gen Z, with 64% of respondents expressing high levels of trust. However, ASIC is watching this space closely. ‘It is clear under Australian law that if any entity is giving financial advice, they need to be licensed,’ Kirkland stated. ‘So if an AI tool is making recommendations about individual financial products, taking into account individual circumstances, that would be personal advice, and it needs to be licensed.’
Regulatory Action
ASIC has already taken action against influencers, issuing warning notices to 18 suspected of unlawfully promoting high-risk financial products and providing unlicensed financial advice. The regulator is also keeping a close eye on the integration of AI into crypto exchanges, such as MEXC, KuCoin, and Bitget, which offer personalized trading guidance through AI chatbots.
Looking Ahead
As the crypto market continues to evolve, ASIC’s focus on protecting young investors from unregulated advice and fraudulent schemes is more critical than ever. The regulator’s proactive stance on monitoring AI and social media for financial advice signals a broader commitment to ensuring that the financial landscape remains safe and transparent for all Australians, especially the tech-savvy Gen Z cohort.
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